Sixty percent of every HCA lawyer’s bonus is tied to reductions of legal fees

Among the National Law Journal’s “20 most influential general counsel in America” stands Robert Waterman, the general counsel of HCA Inc. (See my post of April 6, 2009: some observations on the list of 20 general counsel.). The short squib about him says that he cut HCA’s outside legal fees by 23.2 percent — some $42 million — between 2006 and 2008. That would mean HCA spent about $180 million in 2006 on outside counsel. I assume, but do not know, that 2006 saw external legal spending that was normal for HCA. Otherwise, if for example the resolution that year of a very expensive case or investigation dropped fees from a watershed year, Waterman’s feat is leaky.

Assuming a baseline of spend, the fee cuts came under Waterman in part because HCA agreed to policies to settle cases early and rely on more contract attorneys. Further, Waterman accomplished the drastic slash “through a combination of bonus structures for the in-house legal team, aggressive risk management and innovative fixed-fee arrangements. Since 2007, he has tied 60 percent of every lawyer’s bonus to tough legal fees goals.” What interests me about the final sentence is the direct connection between lower fees and higher bonuses at an individual level, not even at a practice group level.